Capital Market In IndiaAMRUTA NEWALKAR PG-10

RAHUL JAIN PG-17

RAHUL RAVANAGE PG-09

Capital Market

ACE Textile Ltd

Want to expand its business

Mr. ACE

Makes a Business Deal with GUCCI brand to export textile cloth to their manufacturing unit

Where can he get the money from?

1.Banks

1. From Banks Mr. Ace can approach banks, but it will not prove to be a healthy option because: -

Bank will charge him High rate of interest.

Lending of loans is a very tedious task.

Bank first scrutinizes the papers/ documents, verifies them.

Very time Consuming Process. Thus, this idea is not an effective one.

Can Go Public and get listed on the stock companies.

Meaning of Capital Market Capital Market is the part of financial

system which is concerned with raising capital funds by dealing in Shares, Bonds, and other long-term investments.

The market where Investment instruments like bonds, equities and mortgages are traded is known as the capital market.

The different types of financial instruments that are traded in the capital markets are1. equity instruments

2. credit market instruments, 3. insurance instruments, 4. foreign exchange instruments, 5. hybrid instruments.

Role and Function of Capital Market

Capital FormationAvenue Provision of Investment Speed up Economic Growth and Development Mobilization of SavingsProper Regulation of Funds Service Provision Continuous Availability of Funds

Factors affect the Capital Market

• Economy of the Country• Money Supply • Interest Rate • Corporate Results• Global Capital Market Scenario • Foreign Funds Inflow • Strength/Weakness of the local currency

Classification of Capital Marketing

CAPITAL MARKET

PRIMARY MARKETSECONDARY

MARKET

PUBLIC ISSUE

RIGHT ISSUE

BONUS ISSUE

PRIVATE PLACEMENT

STOCK MARKET

Primary Market

It is that market in which shares, debentures and other securities are sold for the first time for collecting long-term capital.

This market is concerned with new issues. Therefore, the primary market is also called NEW ISSUE MARKET.

Features of Primary MarketIt Is Related With New Issues

It Has No Particular PlaceIt Has Various Methods Of Float Capital: Following are

the methods of raising capital in the primary market: i) Public Issue ii) Offer For Sale iii) Private Placement iv) Right Issue v) Electronic-Initial Public OfferIt comes before Secondary Market

Secondary Market The secondary market is that market in which the buying and selling of the previously issued securities is done.

The transactions of the secondary market are generally done through the medium of stock exchange.

The chief purpose of the secondary market is to create liquidity in securities.

Features of Secondary Market

• It Creates Liquidity

• It Comes After Primary Market

• It Has A Particular Place

• It Encourages New Investments

Stock ExchangesIn India

BombayStock

Exchange(BSE)

NationalStock

Exchange(NSE)

RegionalStock

Exchanges

Financial instruments dealt in Secondary market Equity Shares: An equity share is commonly referred to as an ordinary share. It is an form of fractional ownership in which a shareholder, as a

fractional owner, undertakes the entrepreneurial risk associated with the business venture.

Holders of the equity shares are members of the company and have voting rights.

Right shares: This refers to the issue of new securities to the existing

shareholders, at a ratio to those shares already held.

Bonus Shares: These shares are issued by the companies to their shareholders free

of cost by capitalization of accumulated reserves from the profit earned in the earlier years.

Cont…

Preference shares: These shareholder do not have voting rights.

Owners of these shares are entitled to a fixed dividend or a dividend calculated at a fixed rate to be paid regularly before any dividend can be paid in respect of equity shares.

These shareholders also enjoy priority over the equity shareholders in the payment of surplus.

Cumulative Preference Shares: This is a type of preference shares on which dividend accumulates if it

remains unpaid.

Cumulative Convertible Preference Shares: This is a type of preference shares on where the dividend payable on the

same accumulates, if not paid. After a specified date, these shares will be converted into equity capital of the company.

Thank You